Friday, 17 April 2020

Gov’t withdraws new levy on LPG

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April 17, 2020

Adnan Adams Mohammed

The controversial ‘Cylinder Recirculation Recovery Margin’ introduced
by the National Petroleum Authority (NPA), expected to allow LPG operators
charge GHp13.5 for each kilogram of LPG, have been withdrawn.

“That slight increase in price that you saw in the papers,
it has been withdrawn. The recirculation module, I think as you are all aware
was a very noble thing introduced by the government. That amount you saw was
supposed to level up the prices. It has been withdrawn,” The Minister of
Energy, Peter Amewu disclosed this at a press briefing last week Thursday,
April 16, 2020.

The Minister said the government will subsequently decide on the
wayforward in relation to the levy after a careful review by Cabinet.

The Chamber of Petroleum Consumers and the Consumer
Protection Agency had sued the National Petroleum Authority (NPA) over the
introduction of the Cylinder Recirculation Recovery Margin.

The two companies in their writ of summons argued among
others that the NPA failed to consult with various stakeholders before
introducing the policy.

“Plaintiffs state that the failure of the 1st defendant to
consult with the service providers before the introduction of the new petroleum
pricing formula has led to agitations among such service providers,
particularly, the LPG Marketing Companies Association of Ghana (LPGMCs) who
have issued a statement calling on the 1st defendant to withdraw the CRM.”

The NPA on Wednesday, April 1, 2020, directed industry
players to begin charging 13.5 pesewas on each kilogram of LPG.

It also instructed Oil Marketing Companies (OMCs) to
increase the levy on Fuel Marking Margin from three pesewas to 4.5 pesewas per
litre on every product.

The NPA explained that the introduction of the Cylinder
Recirculation Recovery Margin was aimed at supporting stakeholders in the
supply chain ahead of the implementation of the Cylinder Recirculation Model.

Although the NPA justified the move, some industry watchers
have however said that both directives are unlawful and must be withdrawn with
immediate effect given the impact it will have on the business.

NPA in its release issued on Friday, April 4, 2020,
maintained that such calls are unfortunate because its projection rather shows
that for this very pricing window (1st April to 15 April, 2020), consumers are
expected to enjoy a price reduction of about 11.56 percent even with the
introduction of the Cylinder Recovery Margin.

“The attention of the National Petroleum Authority (NPA) has
been drawn to a statement issued by the LPG Marketing Companies Association of
Ghana (LPGMCs) on the above subject, dated April 3, 2020, calling for the
withdrawal of GHp 13.5 Cylinder Recovery Margin which took effect on April 1,
2020. We wish to state categorically that, contrary to their claim that the
introduction of the margin will increase the product price at the pumps and
thereby burden the consumer, the facts as they stand do not support that.”

“The margin is, therefore, to assist the marketers to offset
some of their financial expenses, in accordance with the full cost recovery
principle of petroleum products pricing in Ghana. It is therefore unfortunate
for the LPGMCs to hold such a position”, it added.

The NPA had said it will continue to engage with
stakeholders over concerns raised regarding tax components on LPG.

“We are certainly aware of the difficult situation we all
find ourselves in at this time, and the last thing we will do is to further
burden the consumer with additional taxes. The NPA would, therefore, like to
assure members of the general public of our commitment to ensure product
availability, affordability, and accessibility, while ensuring the safety of
the general public and the business viability of players across the value
chain”, the statement concluded.